Self employed and benefit cap

sblakemore

Hi I’m a self employed painter and decorator and looking to switch from tax credits. I understand I’ll have my UC calculated on a minimum floor income when it starts again unless I earn over this then actual income is used. But will the minimum floor income for me (£935.25 as I’m a single mum) override the £617
needed to lift the cap
or will I be capped as well.

calcotti

I can’t find anything that states this but logically if your UC is calculated on the basis that you have earnings over £617 due to MIF then the benefit cap should not apply.

You will get a 12 month grace period from the start of your claim before the MIF is applied.

sblakemore

Exactly my point it makes sense that both won’t apply doesn’t it, citizens advice agree with me but universal credit haven’t for a clue. The lady I spoke to said my minimum floor income was £292 or something which is actually the work allowance. Google also only ever mentioned the MFI when talking about UC and self employment 

calcotti

Are you actually likely to have an entitlement which is over the benefit cap?

sblakemore

Yes I will unfortunately due to four children means I get just under £1000 for the child element without the housing and the element for myself 

sblakemore

Work will pick up but only once I’ve passed my driving test in June as that will allow me to work more hours as getting round will be easier without public transport and expenses will be less as on average I’m spending £20 in taxis for every job I have at the moment 

calcotti

sblakemore said:

Yes I will unfortunately due to four children means I get just under £1000 for the child element without the housing and the element for myself 

You’ve obviously thought it through. I only asked because sometimes people worry about things that will not affect them!

Slightly bizarre result then, if we are interpreting it correctly, that application of the MIF could actually increase your UC entitlement!

sblakemore

Oh I’m a massive overthinker so been through every possible event including low income months. I’m wondering if I call UC back again I might talk to some who knows. It’s a big leap as the MIF income will be fine for me to live on but if it’s the cap then I’m going to struggle on months I don’t earn a lot 

Icequeen1

calcotti said:

I can’t find anything that states this but logically if your UC is calculated on the basis that you have earnings over £617 due to MIF then the benefit cap should not apply.

You will get a 12 month grace period from the start of your claim before the MIF is applied.

I'm not so sure. Regulation 82 of the UC Regs seems to set out when the benefit cap does not apply. It is where earned income exceeds a certain threshold - earned income usually includes a MIF amount but 82(4) states that 'earned income for this purpose does not include income a person is treated as having by virtue of Reg 62 minimum income floor'. So that seems to suggest it would be your actual earnings that count for the benefit cap. I'm not that familiar with the benefit cap so can't say I have seen this in practice. 

calcotti

Sadly I think ice queen is right. Regulation 82 (4) does specifically exclude income arising from application of the MIF as being counted. So both the MIF and the benefit cap could apply at the same time. This avoids the possibility of the application of the MIF actually increasing a claimant entitlement.

Hat off to ice queen for spotting this.

sblakemore

Icequeen1 said:

calcotti said:

I can’t find anything that states this but logically if your UC is calculated on the basis that you have earnings over £617 due to MIF then the benefit cap should not apply.

You will get a 12 month grace period from the start of your claim before the MIF is applied.

I'm not so sure. Regulation 82 of the UC Regs seems to set out when the benefit cap does not apply. It is where earned income exceeds a certain threshold - earned income usually includes a MIF amount but 82(4) states that 'earned income for this purpose does not include income a person is treated as having by virtue of Reg 62 minimum income floor'. So that seems to suggest it would be your actual earnings that count for the benefit cap. I'm not that familiar with the benefit cap so can't say I have seen this in practice. 

Thank you, it looks like it’s better for me to stay on tax credits until my employment picks up then